Market Report.
🌟 We concluded the week very positively, with the S&P 500 futures reaching new highs. The technology sector is lagging slightly due to dissatisfaction with Nvidia’s results. Now we are only left waiting for the Fed’s PCE inflation data to round off a relatively good week.
📊 Additionally, we learned yesterday that the growth rate of the US economy for Q2 has strengthened, exceeding expectations with a growth of 3.3% compared to the anticipated 3%. Unemployment claims were lower than expected. The indicator for final sales to domestic private buyers rose by 1.9%, indicating that personal consumption and fixed investment are strengthening in the United States.
👍 These are both good and bad news. The good news is that, against all odds, the US economy continues to deliver strong results, and the predictions of disaster due to Trump’s trade war have not materialised so far. The bad news is that, in this case, the Federal Reserve will likely continue to assert that there is no need to cut interest rates based on these data.
🃏 As we have repeated many times before, cutting interest rates is an ace up the Fed’s sleeve, and in reality, it will only be used in two possible scenarios: dramatic falls on Wall Street or a severe worsening of the US economy. We are at highs in the S&P 500 and with good macro data, there will be no interest rate cuts under these conditions.
📉 The Fed’s favoured indicator of inflation, the core personal consumption expenditures (PCE) price index, is expected to have remained stable at 0.3% each month, meaning the annual rate would have been 2.9%.
⚠️ The only piece of data that concerns us is the possible inflation in production that may be beginning to emerge and which, if so, would ultimately spread to final prices and drive up inflation. We are referring to the PPI figures released a couple of weeks ago, which rose by 0.9% in July, compared to expectations of 0.2% according to Reuters surveys.
🗣️ Nevertheless, Fed Governor Christopher Waller stated Thursday that he wants to begin reducing rates next month and “fully expects” additional rate cuts to come in order to put the Fed’s policy rate closer to a neutral level.
🇪🇺 European inflation data will also be released today. German retail sales, published a few minutes ago, fell by 1.5%, worse than expected and down from 1% in the previous period.
😟 The outlook for European economies is very bleak. Germany has experienced two consecutive years of economic contraction, and US tariffs are making things much more difficult. The ECB has cut rates as much as it can, but Europe is on the verge of entering negative real interest rates. If inflation returns to Europe, things will get very ugly.
🌏 Indian Prime Minister Narendra Modi will visit China for the first time in more than seven years next week, where he will meet with President Putin, who will be in China for a four-day state visit. The founding members of the BRICS Alliance, Russia and India, announced plans to increase their annual trade to £100 billion over the next five years, representing a 50% increase.
⚖️ India finds itself in a complicated geopolitical and economic juggling act, navigating tensions with the U.S., Russia, and China. However, the U.S. and India are also deepening strategic ties, cooperating on defense, the Quad, and semiconductor supply chains. This raises questions in Delhi about whether the U.S. views India as a true partner or just another trading problem.
⛽ Russia provides India with cheap oil, saving Delhi over $17 billion since 2022. This is crucial for India’s energy needs and keeping inflation in check. But it has drawn criticism from the U.S. India is navigating a complex geopolitical and economic landscape, trying to maintain relationships with the U.S., Russia, and China despite their competing interests and demands.
🏴☠️ The Israeli government continues to annex Gaza territory. Israel’s finance minister Smotrich suggested that Palestinians should leave for Europe, which could lead to yet another migration crisis in Europe, similar to those caused by the destruction of Libya and Syria. This is an issue of growing concern to the European population. Germany has announced that it is halting arms shipments to Israel. Turkey said Israel should be suspended from the UN General Assembly.
⚡ Ukraine Attacked the Energy Supply of Both Hungary and Slovakia Again according with Reuters. The Unecha oil pumping station, a vital component of the Druzhba pipeline that transports Russian crude oil to Hungary and Slovakia, was targeted by Ukrainian forces in the Bryansk area of Russia.
🔒 Six Ukrainians were detained by German authorities a few days ago for the Nord Stream gas pipeline attack, which severely damaged the German economy.
📊 Market View:
🏆 The S&P 500 futures have reached new all-time highs, surpassing 6,500 points. The Nasdaq futures, however, have improved their trading levels but have not managed to reach the all-time highs of 24,000 points, currently trading at 23,730 points.
💵 The dollar has weakened, with the DXY index falling below 98 points after Waller’s comments yesterday, indicating a desire to reduce interest rates next month. This has caused EUR/USD to surge, although it has not managed to reach 1.17 and is currently retreating to 1.1665.
📉 In Europe, the stock markets are beginning to show weakness, reflecting the challenging situation of the European economy that we have described in the news section. DAX 40 futures are about to lose the 24,000-point mark, while Eurostoxx futures are also struggling to maintain 5,400 points. Be attentive to today’s inflation data in Europe, as it could complicate matters further.
🛢️ Crude oil markets continue to fluctuate, with Brent crude trading between $68.50 and $66.50.
💰 Gold futures are continuing their ascent and are approaching all-time highs once again, currently trading at $3,470 and nearing the $3,500 barrier.
📈 Bitcoin experienced a strong upward bounce during yesterday’s session after touching support at $109,000; however, it is now resuming its decline and is approaching $111,000.
